FRIEDMAN You got me! I think that's just an aberration. My God, how the hell can they stick with that? They've just got an idée fixe about it. Like they've got on immigration. It's just obvious that you can't have free immigration and a welfare state.

The debate about floating exchange rates has been won by the floaters, other than [Columbia University economist Robert] Mundell, who is a nonfloater among major American economists.

BRIMELOW [Wall Street Journal editor Robert] Bartley says he thinks the nation-state is dead, that we're moving to a world driven by markets, free movement of labor and capital. I'm not sure what he thinks the political institutions will be. Your view?

FRIEDMAN No, I don't think the nation-state is dead. And all attempts to depart from the nation-state in the direction of the United Nations and a United States of Europe have so far been complete disasters. It's kind of hard, I think, to get the American public to go that direction very far. They're not very happy with the United Nations. There are beginning to be some rumbles about opposition to the IMF [International Monetary Fund].

BRIMELOW A lot of opposition to NAFTA came from fear of loss of sovereignty . . .

FRIEDMAN I thought NAFTA was a terrible treaty--except that it was better than nothing! [Laughs.] I'd rather have unilateral free trade in the United States.

Other examples [of failed supranational institutions] are the IMF and the World Bank. We would never do with our own money what the IMF and the World Bank have done.

Look what's happening now with Iraq. The United States wants to hide behind the United Nations. Our Iraq policy has been stupid from the beginning. We ought to declare defeat. Give up. Say we're not going to be a policeman for the Europeans. Call it isolationist if you will, but I don't see any other way out.